Is a Franchise Business the Right Choice for Me?
Have you daydreamed of being your own boss, running your own business and taking control of your own destiny? Have you read magazine articles about franchise opportunities and perhaps taken the first step and requested information to start a franchise? You may be a good candidate to be a franchise owner, but I encourage you to do your homework carefully before you make this big decision.
Advantages to choosing a franchise.
As a child growing up in the 1970’s in a town with a population of about 10,000 in West Central Minnesota, I recall going to a restaurant called “The Quick Stop.” They sold what we would call “fast food,” that was ordered at the counter. It was always a treat to go eat there and they were always busy. A new restaurant called McDonalds opened up about two blocks down the road, and it did not take long for The Quick Stop to close. They both sold essentially the same product, fast food, in the same manner, but McDonalds captured the market share and the independent restaurant soon closed.
A key advantage of a franchise is the brand and identity they have established. Often they also have large nationwide marketing and advertising campaigns to continue to expand this brand identity and awareness. This, along with an established product or service, help draw awareness and new customers into their door. I have had the opportunity to travel internationally and I make it a point to have a Big Mac and Coke in every country I go to and I can assure you they all taste the same! This similar experience (branding) is a high priority of franchises and builds confidence in the eyes of the consumer. The word Coke or Coca-Cola is recognized around the globe in every language. This is possible through strong branding and brand development along with marketing and advertising.
Another benefit that a franchise business brings is its operational standards, procedures and training program. New franchisees often go through a training program to learn how to operate and manage their business. This education and training can be very valuable in the ultimate success of the business. Larger franchises often have regional developers or “coaches” which work with franchisees in developing and expanding their business, handling operational questions, opening new locations, etc. Ongoing support can be valuable in creating a long lasting business which will have value once you decide to sell it and move onto another opportunity.
Am I the right person to own a franchise?
One of the first things to do is reflect honestly and carefully and decide if you will be a good fit to own a franchise business. All successful business owners share a strong passion for their business. Along with this passion is a strong work ethic and willingness to put in the necessary time to create a successful business. People skills and a desire to work with others, both coworkers and customers is also needed. Most businesses, including franchise businesses, are not get rich quick opportunities, and they take a lot of time, effort and energy to be successful. Ultimately as a business grows, your role will include more leading, guiding and directing, but initially you will probably be working in the business alongside your team.
A successful franchisee also needs to be willing and able to follow a plan and a business model. One of the biggest items you acquire when purchasing a franchise business is the business model and operating procedures that is already developed and proven. If you have your own ideas on how to run things, you may become frustrated and question why you need to do things “their way.”
For example, if you are an aspiring restaurant owner a franchise restaurant may be a great opportunity as they have an established brand, marketing presence, well developed training program, and ongoing support to assist you in becoming a successful business owner. If your personality is one that you prefer to experiment with recipes, create your own daily specials, etc., you may be very frustrated in a franchise restaurant where you are not allowed to follow your creativity. There are many successful sandwich shops or coffee shops, along with the major franchise businesses we all are familiar with. If you prefer to do your own thing and follow your own ideas, you may be happier as an independent business owner without the assistance of a franchise.
Do your homework!
There is a substantial financial investment in a franchise. It is important to do your homework, read, ask questions, and do your research. Read all of the franchise literature carefully, especially the franchise agreement. The franchise agreement is loaded with details and fine print that you will be obligated to follow for the duration of the agreement. Items to look at are minimum royalty and advertising fees, required expenditures, required hours of operations, etc. I have heard of these referred to as similar to a “marriage agreement.” They are easy to get into, but can be difficult to get out of if you decide it is not the right fit for you. Perform an honest analysis research your market area and competition. Some franchises may work wonderfully in a large urban or suburban area, but in a more rural area they may struggle. Contact existing franchise owners and ask them of their experience. Ask them to honestly share with you if they feel they are getting value for the investment they have made.
Before you make a decision, it is always wise to get guidance from your team of experts. Speak with your accountant, create a business plan with realistic financial projections, discuss your business structure, and have a professional review of the franchise agreement for any concerns they may observe.
Performing due diligence ahead of time can help you enter into a wonderful relationship with the franchisor, and avoid a “bad marriage” situation.